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Another trading week ends with growth. It is not at all clear what the driver is, but most likely the US market has now decided to try its hand at being Las Vegas. Where one wants to take a lot of risks.

S&P500

A very strong US jobs report came out, after which there was serious talk that the Fed would start to raise rates. But of course the Fed will not be reckless. Such reports are not enough to make serious interest rate decisions. After all, it is summer, a time of holidays and it is unlikely that the Fed will start to act to cut the quantitative easing programme at this time. Most likely, they will start to act in autumn, when the majority is in the market.
OPEC+ negotiations were very important for global markets last week. OPEC was in favour of an increase in production by 700 kbpd.
In the current situation there is still the question of where commodity prices will go. Global inflation is just picking up and global commodity prices are breaking records.
What follows is likely to be a correction, which at the moment is difficult to anticipate. A huge period of growth has to be corrected somewhere in any case.

03.30 Australian retail sales for May
10.00 Markit Composite PMI Final in Germany for June

Important Notes on This Publication:

The content of this publication is for general information purposes only. In this context, it is neither an individual investment recommendation or advice nor an offer to purchase or sell securities or other financial products. The content in question and all the information contained therein do not in any way replace individual investor- or investment-oriented advice. No reliable forecast or indication for the future is possible with respect to any presentation or information on the present or past performance of the relevant underlying assets. All information and data presented in this publication are based on reliable sources. However, Bernstein Bank does not guarantee that the information and data contained in this publication is up-to-date, correct and complete. Securities traded on the financial markets are subject to price fluctuations. A contract for difference (CFD) is also a financial instrument with leverage effect. Against this backdrop, CFD trading involves a high risk up to the point of total loss and may not be suitable for all investors. Therefore, make sure that you have fully understood all the correlating risks. If necessary, ask for independent advice.

Not even a couple of days later, the US market is once again storming to historic highs. Indices are higher and closer to the area called the “pain zone for market participants”. Why is the upside so scary? Let’s find out.

S&P500

At the moment, the entire world is still in a state of pandemic and continues to vaccinate the population. There is little protection against the coronavirus, given that the new strain from India has begun to infect people who have already been vaccinated.
Most of the world’s banks have all but exhausted their monetary means of regulating the economy. It can be said that this ship of support money has now reached full speed and is adrift. Whether it will be able to stop quickly is a big question.
The world market has become a kind of peculiar game and risk, which does not reflect the current economic situation in any way. All this can lead to any negative driver sending markets into a very deep correction. Already now we can see that the market takes a new high, and then corrects quite strongly, and then another high and another correction. This behavior suggests that traders are just waiting for someone to be the first to start a sell-off trend. And then everything will follow a chain reaction. In such situations, the correction can easily reach 20-30%.
It is very scary to buy the S&P500 at the moment, because it is not clear where the profit will be and where the stop will be in case of a fall. The chart forms a “rising wedge” pattern, which according to technical analysis is a reversal pattern and very often breaks down.
Even though the summer is the holiday time, but now we should not relax. At any moment something important can happen that will start a global correction in the markets.

14.30 New jobs created outside agriculture in the US for June
14.30 Address by ECB head C. Lagarde
16.00 US factory orders for May

Important Notes on This Publication:

The content of this publication is for general information purposes only. In this context, it is neither an individual investment recommendation or advice nor an offer to purchase or sell securities or other financial products. The content in question and all the information contained therein do not in any way replace individual investor- or investment-oriented advice. No reliable forecast or indication for the future is possible with respect to any presentation or information on the present or past performance of the relevant underlying assets. All information and data presented in this publication are based on reliable sources. However, Bernstein Bank does not guarantee that the information and data contained in this publication is up-to-date, correct and complete. Securities traded on the financial markets are subject to price fluctuations. A contract for difference (CFD) is also a financial instrument with leverage effect. Against this backdrop, CFD trading involves a high risk up to the point of total loss and may not be suitable for all investors. Therefore, make sure that you have fully understood all the correlating risks. If necessary, ask for independent advice.

It’s time to have a little discussion about the fate of bitcoin and the crypto-world. After all, lately it feels like cryptocurrencies are having some problems. Bitcoin just recently tried to break down the $30000 level, prompting some analysts to predict another crypto-winter.

BTCUSD

What the markets are witnessing right now. It is clear to everyone that inflation is bound to rise. Dollars are pouring into the system every month, the printing press is running non-stop. Bitcoin has long been a very interesting asset, even for parties with large capital. It has limited issuance and is increasingly being used as an instrument, on a par with gold.
There is some tension right now due to lower hash rates and the banning of miners from China, but that action is probably only good for bitcoin. These miners will move their equipment somewhere and continue to do their business anyway. And the rest of the crypto market will only be happy to see the computing power dispersed across Asia.
Many expect other countries to follow El Salvador’s example and start integrating bitcoin into their economies. In this way, these countries can create crypto offshore facilities through which substantial sums of money can be funneled.
There is also a second option with mining in China. Already now, miners are beginning to find ways to circumvent government bans on mining. After all, the ban only applies to connecting to public power grids. Simply mining on private networks or using green technology is not banned. Having done the math, an interesting picture emerges. A 3kW portable hydropower plant to which a single Bitmain S17 asic can be connected will already pay for itself in 2 months. The Yangtze River already has about 25,000 private hydropower plants in operation. Bitcoin mining business is getting better.
It’s only a matter of time before the hashrate rebuilds. It won’t be long before it starts rising again as miners adjust to the new conditions. As history tells us, a rise in hashrate is always accompanied by a rise in price in the future. So it is worth wondering where bitcoin will go in the autumn.

8.00 German retail sales for May
14.30 U.S. initial jobless claims index EU consumer price index YTD
16.00 US ISM manufacturing activity index for May

Important Notes on This Publication:

The content of this publication is for general information purposes only. In this context, it is neither an individual investment recommendation or advice nor an offer to purchase or sell securities or other financial products. The content in question and all the information contained therein do not in any way replace individual investor- or investment-oriented advice. No reliable forecast or indication for the future is possible with respect to any presentation or information on the present or past performance of the relevant underlying assets. All information and data presented in this publication are based on reliable sources. However, Bernstein Bank does not guarantee that the information and data contained in this publication is up-to-date, correct and complete. Securities traded on the financial markets are subject to price fluctuations. A contract for difference (CFD) is also a financial instrument with leverage effect. Against this backdrop, CFD trading involves a high risk up to the point of total loss and may not be suitable for all investors. Therefore, make sure that you have fully understood all the correlating risks. If necessary, ask for independent advice.

The second quarter of 2021 is just around the corner. Usually by the end of the quarter there is an increase in volatility in the markets as many companies and funds rebalance their portfolios. Be careful as there could be a bit of a turbulence. Whether there will be more gold in these portfolios is the question.

XAUUSD

For the time being, gold remains in uncertainty. The price per troy ounce has been in a range for the past week. There were hardly any upside attempts, although there was potential.
Perhaps gold is waiting for Friday’s payrolls, which will show the US labour market dynamics. Also, during the week there will be a lot of speeches of regional banks’ heads, which will try to clarify the current situation and make forecasts to some extent.
According to the latest statements it was clear that the officials have split into two camps. Some want to continue the QE program and keep rates low for as long as possible, others are already calling for a gradual scaling back of the QE program and a tightening of monetary policy. One thing they agree on is that the labour market should be watched closely now. Only once it has recovered can further steps be taken.
What else can be said about gold. The main upward trends have not been broken. The uptrend continues, and now investors are in some waiting for the labour market data. Of course gold has a very strong resistance level at the top, which will be impossible to pass without momentum.
Another problem is the strengthening USD, which has been the favorite currency in the last couple of days. Investors opted to exit some of the risky assets into the USD before the statistics. Because of this the price of the precious metal fell.
The closing of the quarter is taking its toll, therefore gold is likely to remain in consolidation in the next couple of weeks, and will not show much momentum. But, a rise in inflation has not been cancelled out. The pumping of money into the system has not stopped, and we will see $2000 per troy ounce in gold in the near future after all.

8.00 UK Q1 2021 GDP
11.00 EU Consumer Price Index YTD
14.15 ADP private sector employment report for June

Important Notes on This Publication:

The content of this publication is for general information purposes only. In this context, it is neither an individual investment recommendation or advice nor an offer to purchase or sell securities or other financial products. The content in question and all the information contained therein do not in any way replace individual investor- or investment-oriented advice. No reliable forecast or indication for the future is possible with respect to any presentation or information on the present or past performance of the relevant underlying assets. All information and data presented in this publication are based on reliable sources. However, Bernstein Bank does not guarantee that the information and data contained in this publication is up-to-date, correct and complete. Securities traded on the financial markets are subject to price fluctuations. A contract for difference (CFD) is also a financial instrument with leverage effect. Against this backdrop, CFD trading involves a high risk up to the point of total loss and may not be suitable for all investors. Therefore, make sure that you have fully understood all the correlating risks. If necessary, ask for independent advice.

Another trading week is over. The S&P500 index made another all-time high on Friday, although just a week ago many thought a serious correction was ahead. Let’s try to look a little deeper. Isn’t it time to think about a possible crisis in the USA?

S&P500

Where did that come from? After all, everything seems to be going well. Indices are rising, the economy is pumping money, the labour market is expanding and the coronavirus is in retreat.
It’s worth looking at US government bond yields. Yields on 10 year bonds have fallen sharply and yields on 2 year bonds have risen. The narrowing of the spread between these assets has been going on since early March. What could that mean? Ideally, it could mean that market participants do not want to look at the long term and assume a monetary policy tightening much earlier than planned. Such manoeuvres could push the economy into recession. It is already clear that markets cannot grow without money printing and a non-zero interest rate.
History is also important. Over the last 40 years a decrease in the spread between 10-year and 2-year government bonds in the USA has always presaged a recession.
There is another thought that begs the question. The US Fed is now actively buying government bonds to finance the record federal deficit. But it is not very clear why the Fed is buying up mortgage bonds in record amounts. After all, according to reports there are no problems in the US housing market. These bonds could have been sitting quietly in banks and generating a certain income.
But the Fed has bought them at the maximum amount since the start of the year for some reason. Probably, there is some information that these bonds will lose their value in the near future. After all, everyone remembers 2008, when a large number of borrowers simply could not service their mortgages.

8.00 German import price index for June
15.00 FOMC Member Williams to speak
16.00 US University of Michigan Consumer Confidence Index for June

Important Notes on This Publication:

The content of this publication is for general information purposes only. In this context, it is neither an individual investment recommendation or advice nor an offer to purchase or sell securities or other financial products. The content in question and all the information contained therein do not in any way replace individual investor- or investment-oriented advice. No reliable forecast or indication for the future is possible with respect to any presentation or information on the present or past performance of the relevant underlying assets. All information and data presented in this publication are based on reliable sources. However, Bernstein Bank does not guarantee that the information and data contained in this publication is up-to-date, correct and complete. Securities traded on the financial markets are subject to price fluctuations. A contract for difference (CFD) is also a financial instrument with leverage effect. Against this backdrop, CFD trading involves a high risk up to the point of total loss and may not be suitable for all investors. Therefore, make sure that you have fully understood all the correlating risks. If necessary, ask for independent advice.

In recent months, the whole world has been in the vaccination phase. More than half the world’s population had already been vaccinated. All this meant that we were about to go back to our old lives, without lockdowns and distancing. But suddenly an Indian strain of coronavirus has emerged that could make a difference to our future.

GBP/USD

Why do we have a graph of the pound/dollar pair? Because it all starts again with the UK. June 23th marks 5 years since the Brexit referendum data was published, which shocked the whole of Europe. At that time the GBP/USD pair flew downhill and still hasn’t recovered to the previous levels. It can now be affirmatively stated that due to the all-round weakness of the economy, the pound is an outsider currency.
As research shows, the entire UK corporate sector is going to face big problems in the future. Already we can see that the economy of this state is not growing at the rate that was predicted, all because of Brexit.
The pound has a difficult fate ahead of it. It’s likely to be in a range for a long time. The government is having a hard time rocking this system, even though they are forecasting GDP growth of as much as 7% due to the consumer boom.
This is where the Indian strain of coronavirus comes into the picture. There are a huge number of new infections in the UK, even though the country says more than 65% of the population has already been vaccinated. In a month and a half the number of infections has gone from two thousand a day to sixteen. The rate of spread is impressive. What does this mean? Is the vaccine not working? Many questions remain unanswered, but it is time for the government to take action and conduct research in parallel. If nothing is done, the fragile economy will very quickly lose what it has managed to preserve of late.
If we look deeper, let’s imagine that there is such an increase in disease in the US. Restrictions would have to be imposed again. The labour market could collapse again and the economic recovery would be over very quickly.
All forecasts would have to be thrown out and scenarios rewritten. This development could be very painful for the entire global community and set things back a couple of years.

8.00 Gfk consumer confidence index in Germany for June
14.30 US Personal Consumption Expenditure YTD
16.00 US Consumer Confidence Index for June from the University of Michigan

Important Notes on This Publication:

The content of this publication is for general information purposes only. In this context, it is neither an individual investment recommendation or advice nor an offer to purchase or sell securities or other financial products. The content in question and all the information contained therein do not in any way replace individual investor- or investment-oriented advice. No reliable forecast or indication for the future is possible with respect to any presentation or information on the present or past performance of the relevant underlying assets. All information and data presented in this publication are based on reliable sources. However, Bernstein Bank does not guarantee that the information and data contained in this publication is up-to-date, correct and complete. Securities traded on the financial markets are subject to price fluctuations. A contract for difference (CFD) is also a financial instrument with leverage effect. Against this backdrop, CFD trading involves a high risk up to the point of total loss and may not be suitable for all investors. Therefore, make sure that you have fully understood all the correlating risks. If necessary, ask for independent advice.

The oil market has been showing a positive trend throughout the week. The price of a barrel of WTI oil has surpassed pre-pandemic coronavirus levels. The US Fed continues to print huge amounts of money. What guarantee is there that oil will not cost $100 a barrel? Will the US then be able to cope with inflationary pressures?

OIL.WTI

In fact, the situation is complicated. At his last speech Powell said that 5% inflation in the US was unacceptable. The Fed now predicts inflation at 3.1% by the end of the year, with not much left before 5%.
But what happens if the price of oil continues to rise? After all, the cost of energy is built into the price of almost all goods. Inflation would accelerate under such circumstances. In this situation, Powell and team will have to raise the inflation target once again. And what will the central bank do? It will have a hard time continuing the quantitative easing program and keeping interest rates at current levels. It will have to raise it in an emergency.
Given all of the above, it is not in the interests of the US to increase the price of oil now, as inflation could become uncontrollable. Therefore the first thing to do is to negotiate with Iran now so that it can fully enter the oil market. But that will probably not be enough. Saudi Arabia will also need to be persuaded to increase production. It is possible that this issue will already be raised at the OPEC+ meeting to be held on 1 July.
What will all this mean for us? Firstly, we need to keep a close eye on the oil price. Most likely, the US will try to cool the market by all means.
Second, the central bank will try to weaken the US dollar because any strengthening of the dollar automatically makes oil even more expensive for all buyers in other currencies as it is denominated in US dollars. Again, this will be a problem for everyone.

8.45 Address by Bank of Japan Governor Kuroda
13.00 Bank of England Interest Rate Decision and Monetary Policy Report
14.30 US initial jobless claims
14.30 US Durable Goods Orders for May

Important Notes on This Publication:

The content of this publication is for general information purposes only. In this context, it is neither an individual investment recommendation or advice nor an offer to purchase or sell securities or other financial products. The content in question and all the information contained therein do not in any way replace individual investor- or investment-oriented advice. No reliable forecast or indication for the future is possible with respect to any presentation or information on the present or past performance of the relevant underlying assets. All information and data presented in this publication are based on reliable sources. However, Bernstein Bank does not guarantee that the information and data contained in this publication is up-to-date, correct and complete. Securities traded on the financial markets are subject to price fluctuations. A contract for difference (CFD) is also a financial instrument with leverage effect. Against this backdrop, CFD trading involves a high risk up to the point of total loss and may not be suitable for all investors. Therefore, make sure that you have fully understood all the correlating risks. If necessary, ask for independent advice.

First this year, bitcoin managed to double in value and then fall by the same amount. At the same time, many altcoins have risen 10-20 times in that time, and now have fallen just as quickly. Why does this happen? And how can this help traders?

BTC

Cryptocurrencies are subject to common market cycles. And the traders who trade them are subject to common emotions with the stock and currency markets.
Gold, by itself, does not generate cash flow. When the risk appetite grows in the market, other risky assets, including metals and precious metals, can rise very strongly against gold. On the other hand, when markets correct, when investors run away from risk, all these risky assets fall against gold no less, and even faster.
Sound familiar? This is exactly what we see in the cryptocurrency market in relation to bitcoin. And that’s why we call it digital gold. Since the beginning of this year, only a lazy man has not criticised the first cryptocurrency for growing extremely slowly. Slow in comparison not even with most altcoins, but with the top ten coins in terms of capitalisation. Such as Ether, Cardano, Dogcoin etc.
But what happened next? When the market began to correct, for the first few days you could see the following situation. Bitcoin falling by 5% and other cryptocurrencies falling by 5%. However, this did not last long. Major investors remembered that there is only one digital gold. What happens next is that the situation develops like this. On any strong down day, bitcoin falls by 5% and alts by 7%-12%. And so it goes on day after day.
On rising days, on the other hand, bitcoin rises 5% and alts only 3%-5%. In fact, bitcoin’s dominance of the market is increasing rapidly. Investors are willing to sell it last, getting rid of other cryptocurrencies. Alternatively, they are directly converting altcoins to BTC.
Why do traders need to understand this process? It’s simple. The market will only continue to grow when altcoins rise much faster than bitcoin on the rising days. And on down days, they will fall almost as fast as the bitcoin.

03.00 China service sector activity in June
08.00 UK Q1 GDP
11.00 EU Consumer Price Index for June

Important Notes on This Publication:

The content of this publication is for general information purposes only. In this context, it is neither an individual investment recommendation or advice nor an offer to purchase or sell securities or other financial products. The content in question and all the information contained therein do not in any way replace individual investor- or investment-oriented advice. No reliable forecast or indication for the future is possible with respect to any presentation or information on the present or past performance of the relevant underlying assets. All information and data presented in this publication are based on reliable sources. However, Bernstein Bank does not guarantee that the information and data contained in this publication is up-to-date, correct and complete. Securities traded on the financial markets are subject to price fluctuations. A contract for difference (CFD) is also a financial instrument with leverage effect. Against this backdrop, CFD trading involves a high risk up to the point of total loss and may not be suitable for all investors. Therefore, make sure that you have fully understood all the correlating risks. If necessary, ask for independent advice.

Three days have passed since the announcement of the results of the Fed meeting. During this time the US dollar has risen sharply against all currencies. The main idea is that the Fed will have to raise rates as early as 2023. The big question is how long this upward trend will last.

DXY

If one thinks that the growth of the dollar means weakness in other currencies, especially in emerging markets, this is not the case. The US dollar has primarily risen against raw materials and precious metals. In other words, it has started to collapse in their prices.
Is the bubble collapsing in comodities or is this just the correction that everyone has been waiting for? Indeed, speculators have really jacked up their prices in recent months. After all, the real value has not been formed by supply and demand for a long time now. Yes, these factors certainly affect the market, but with a large time lag. But the market is very quickly influenced by the positions of the big players in futures contracts. It is the futures that move the price.
So the natural desire to lock in big profits + a huge number of leveraged positions, led to a sharp fall in the price of the commodity. Which dragged down currencies and then stock markets, including the US.
However, if you look at the Euro/Dollar pair, you can see that so far nothing terrible has happened. The price is approximately in the middle of the annual corridor. And only a break-down of the level of 1.16 might set a new long-term trend. This level is still 2.5 figures away. In case it penetrates that level, it might turn out to be a bear trap.
The main thing is that thanks to the Fed, the volatility that our traders have been waiting for is back on the market.

11.00 EU Business Climate Index for June
16.30 Federal Reserve Bank of Dallas Industrial Activity Index for June

Important Notes on This Publication:

The content of this publication is for general information purposes only. In this context, it is neither an individual investment recommendation or advice nor an offer to purchase or sell securities or other financial products. The content in question and all the information contained therein do not in any way replace individual investor- or investment-oriented advice. No reliable forecast or indication for the future is possible with respect to any presentation or information on the present or past performance of the relevant underlying assets. All information and data presented in this publication are based on reliable sources. However, Bernstein Bank does not guarantee that the information and data contained in this publication is up-to-date, correct and complete. Securities traded on the financial markets are subject to price fluctuations. A contract for difference (CFD) is also a financial instrument with leverage effect. Against this backdrop, CFD trading involves a high risk up to the point of total loss and may not be suitable for all investors. Therefore, make sure that you have fully understood all the correlating risks. If necessary, ask for independent advice.

Of course the most important event of the week was the US Federal Open Market Committee meeting, where the situation in the economy was analysed and further interest rate actions were discussed. On Wednesday the results of this meeting were announced, which confused the markets a bit, which strongly affected many assets, and in particular the movement of S&P500 index.

S&P500

In this meeting it was very important not to scare the markets off and bring them down like Ben Bernanke did in his time. After the dramatic announcements of a reduction in quantitative stimulus, the market collapsed by 10% quite quickly. The same mistake could not be made now. Fortunately the commission remembers all its blunders.
Everybody was waiting for this meeting, for the US Fed to clarify plans for the future, as well as to show its strength and control over the situation. According to the results of the report, inflation in the USA has accelerated so much that it simply could not be ignored. Inflation forecasts rose by 1 basis point to 3.4% by the end of 2021. In this situation, the commission had to revise its forecast for an interest rate increase. Members now believe that the rate will be raised twice by the end of 2023, but when this will be done will be decided later depending on the situation.
The growth of the US economy will be the main parameter in decision-making. It will determine when rates will be raised and when the quantitative easing programme will be phased out.
There are a few things to note from the press conference. It was on a positive note. Powell said that so far they are watching closely what is happening in the economy and analyzing all the parameters. Decisions will be made later, when they are sure of that. So far they are not going to curtail the program and continue to buy assets.
The results of this meeting were mixed, but that’s exactly what the market needs right now. They hinted that they should be cautious and wait. Summer is holiday time. No one wants to spend it in deep contemplations about the investment future, therefore, most likely, in summer the Fed will not make any loud statements, and will wait until autumn. During the summer the situation will normalise and the major indices may even try to make new highs. The best part will start in autumn, when the heated inflation and the economy will start to be extinguished a bit.

05.00 Bank of Japan interest rate decision and press conference
08.00 German producer price index for May

Important Notes on This Publication:

The content of this publication is for general information purposes only. In this context, it is neither an individual investment recommendation or advice nor an offer to purchase or sell securities or other financial products. The content in question and all the information contained therein do not in any way replace individual investor- or investment-oriented advice. No reliable forecast or indication for the future is possible with respect to any presentation or information on the present or past performance of the relevant underlying assets. All information and data presented in this publication are based on reliable sources. However, Bernstein Bank does not guarantee that the information and data contained in this publication is up-to-date, correct and complete. Securities traded on the financial markets are subject to price fluctuations. A contract for difference (CFD) is also a financial instrument with leverage effect. Against this backdrop, CFD trading involves a high risk up to the point of total loss and may not be suitable for all investors. Therefore, make sure that you have fully understood all the correlating risks. If necessary, ask for independent advice.